Tags: Stock | conundrum | buy | risk

Stock Market Conundrum: To Buy or Not to Buy

By Dan Weil   |   Wednesday, 15 Feb 2012 07:54 AM

Stocks are on a tear lately, with the Standard & Poor’s 500 Index already up 7 percent this year. So what’s a prudent investor to do?

If you buy, you face the risk of a massive sell-off, like the one that occurred in August and September last year. If you don’t buy, you risk missing a major rally.

Fundamentals are cloudy. U.S. economic growth appears to be accelerating, but at a very mild pace. U.S. corporate earnings remain strong, but growth is decelerating. Europe hasn’t solved its debt crisis, but one day the outlook will look rosy, and the next day dark.

Many investors are coping with the uncertainty by purchasing dividend-paying stocks and high-yield bonds, The Wall Street Journal reports. Those holdings can thrive in an environment of slow economic growth, and the dividend stocks provide safety in times of turmoil.

"You don't need to make a giant [one-way] bet on the market," Vadim Zlotnikov, chief market strategist at AllianceBernstein Investments, tells The Journal.

"You can still make money in between."

But don’t expect guidance from the economy. “The thing with a lot of the economic data is that it’s just very choppy,” Paul Simon, chief investment officer at Tactical Allocation Group, tells Bloomberg.

“It’s a reflection of the systemic struggles that the economy has going in fits and starts. You’ve had a pretty significant run-up in the market, and you haven’t really had any significant pullback.”




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